China is facing a significant slowdown in its economy, with recent statistics highlighting a worrying trend. Last month, investment fell more than it has since the start of the pandemic. Fixed asset investment dropped by 1.7% compared to the same time last year. This decline was much steeper than the anticipated 0.8% drop.
Housing prices are also declining. In October, new home prices fell by 0.45%, marking the steepest decline since last year. This signals ongoing trouble in the crucial real estate sector.
Lynn Song, chief economist at ING for Greater China, noted that while the economy may still meet the government’s growth target of 5% for this year, additional supportive policies will be essential for achieving long-term goals. He emphasized the need for effective intervention to stimulate growth.
Industrial production grew by only 4.9%, which is below the forecast of 5.5%. Retail sales showed some resilience, expanding by 2.9%, but this is still a decline from 3% in the previous month.
Fu Linghui, spokesperson for the National Bureau of Statistics, stated that the economy is operating “relatively smoothly,” yet many uncertainties persist. The challenges include the need to adjust the domestic economic structure to maintain stability.
Interestingly, China is experiencing a “two-speed” economy. While exports and some investments remain strong, domestic demand is weak. A pivot to boost local consumption began over a year ago, including easing monetary policy and issuing stimulus bonds, but these efforts haven’t significantly revived consumer spending.
Private sector investment has dropped by 4.5%, reflecting a lack of confidence among businesses. Even government investment is slowing down, indicating a potential contraction soon. This situation is compounded by a recent decrease in new bank loans, suggesting that companies are hesitant to invest.
Yuhan Zhang, a principal economist at the Conference Board, pointed out that ongoing weaknesses in the housing market are affecting overall economic sentiment. He highlighted that the second-hand housing market reveals structural oversupply and low consumer confidence.
To add context, the situation now contrasts with the booming phase the Chinese economy enjoyed during the last decade. Back then, rapid growth and a robust housing market fueled optimism. Today, many are left wondering how policymakers will respond to these emerging challenges.
As of now, significant changes or new measures may be required to navigate these turbulent waters successfully. Continued monitoring of economic indicators will be key to understanding China’s economic health going forward.
For more insights on economic trends in China, you can refer to the latest reports from China’s National Bureau of Statistics and ING Research.
